Crude: Time To Buy?
Abdul H Jaffar | Nov 20, 2018 03:48AM ET
For six weeks the bears in crude oil has beat their drums, when crude lost buying interest as EIA and OPEC lowered their forecast for global oil demand for the rest of 2018 and 2019. More than $20/barrel was shed off from the year’s high. Are we looking for a rebound as price hit 30 degree uptrend line and above yearly pivot $54.22?
The global growth slowdown, which was the initial catalyst for the sell-off, forced OPEC to meet this December 6th to agree on a supply reduction as suggested by Saudi’s enegy minister Khalid Al-Falih. Nevertheless, this initiative could be meaningless if Russia decided not to participate in any joint move with OPEC.
Trade Plan:
But for now, the bullish hammer closed yesterday and less inventories expected (2.099M vs 10.270M) plus the long term bullish technicals warrant a buy above weekly pivot ($57.80) with a stop below yearly pivot ($54.20) and a target of 38.2% of October’s high and last week low ($63.50).
Sure, this is a counter-trend from a daily perspective, but it is inline with the weekly trend. I’ll update my stop to $54.80 once price closed above $58.80 to reduce risk. Once price closed above $61.20, I will close half and update stop to breakeven. I expect to hit the target as we come close to December 6th, the OPEC meeting. Last but not least, if trade was triggered and price fell back and closed below $54.80, then I will cut the loss short for $3 loss a barrel.
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